The art of investing and living

What is common between the art of living and the art of investing? Well, both require concentration and self-control and both give happiness, spiritual and material, respectively.

Or should we describe these two arts as bhaktiyog and karmayog, both delivering satisfaction of some kind. And this could be the description of Amruth Rao, vice president, CanBank Mutual Fund.

Rao, who has been in the mutual fund sector since 1992, manages the short-term debt schemes of CanBank Mutual Fund, viz. Canliquid and CanFloating Rate, and is an ardent follower of the Vedic principles as taught in the Art of Living of Sri Sri Ravi Shankar.

Canliquid has delivered returns of 6.49 per cent over the past one year and CanFloating Rate scheme has clocked returns of 6.77 per cent, being the second-best and the best returns respectively as per Value Research, in the categories of short-term debt and floating rate schemes.

The average returns in the above categories have been 6.26 per cent (institutional segment) and 6.13 per cent, respectively.

In short-term debt schemes, the main task is to manage liquidity and give good returns. Rao says, "The success of this task depends upon various factors. Our rapport with the corporates plays a significant role, along with our view on short-term interest rates. Deciding the duration of the paper that we buy is also important."

He adds that events like the budget or the credit policy and issues like advance tax payments, which depend upon the corporate performances, are other factors that determine the investing approach that is adopted.

"The liquidity position is the single most important factor in managing short-term debt funds. This in turn is based on the inflows and outflows from our schemes. At times, unforeseen circumstances lead to sudden withdrawals by corporates. Apart from that, daily monitoring of interest rates is crucial. It is your view on the rates that determines success or failure. The Mibor (Mumbai Inter-bank offered rate) has increased from 6.10 to 6.85, which indicates tightness in liquidity," observes Rao.

He proudly displays the best scheme in the category award received by Canliquid in 2004 and 2005 from Icra (leading credit rating agency). Canliquid and CanFloating Rate schemes, launched in January 2002 and February 2005, are the flagship schemes of the fund house in the debt category.

At present they have a corpus of about Rs 1400 crore (Rs 14 billion) and Rs 750 crore (Rs 7.5 billion), respectively.

Investments into short-term debt schemes, where the average maturity is less than one year, come irrespective of the conditions in equity markets or the long-term interest rate trends, according to Rao.

The cash surpluses of corporates continue to find their way into such schemes. It is the medium to long-term debt schemes and gilt schemes, which are affected by a rising interest rate scenario. "These schemes will under-perform if rates keep rising, especially if they have a higher modified duration," adds Rao.

Earlier, the Fed increased rates and Indian interest rates followed suit. Rao points out, "Last time, Fed has not increased their rates and going forward there is an indication of a stable or falling Fed rates. But in India, interest rates are likely to move northward in the short-term in light of the liquidity situation. Thus, at present flows into debt schemes are primarily coming to short-term/liquid or floating rate schemes. Going forward, fund managers will wait for the credit policy."

Out of the top 10 mutual funds worldwide, eight are bank-sponsored. Rao sees the brand of Canara Bank and its wide network, as the major plus points for his fund house.

He also expects further consolidation in the mutual fund sector. "Growth is also expected from the potential that exists in the semi-urban and rural areas. We have 22 branches across India and we concentrate on good performance, good service and investor education," says an optimistic Rao.

"A person should have a basket of investments depending upon his liquidity needs, his expectations from the markets and his timing. One good aspect about liquid and floating rate schemes is that they give returns of over 6 per cent per annum even in a single day, better than bank deposits. Internationally, the mutual fund industry is bigger than bank deposits," adds Rao, giving his scoop on investment philosophy.

Citing the example of a 30-year old salaried person, he feels that after investing in public provident fund and insurance, the rest of the investible surplus should ideally be invested in various kinds of mutual funds, with 50-55 per cent in equity schemes, 25 per cent in balanced schemes and the rest in debt schemes.

A science graduate, along with a law degree, Rao has also cleared CAIIB exams and done a correspondence management program from Newport University. Before heading the short-term debt portfolio, he was managing the balanced scheme - CanPremium - for 7-8 years from 1992. Prior to that he was working with Canara Bank.

At times, his playground shifts from the debt markets to the billiards table and during this spare time Rao also likes to swim. He was the football captain in college and also played table tennis and was into athletics.

Apart from spending time with his family, Rao is also involved with the Art of Living programs of Sri Sri Ravi Shankar in Borivli in Mumbai. Beyond his art of investing, his art of living also includes 30 minutes per day of Sudarshan Kriya or Pranayam (which is the science of breath control as described to novices).